Standard & Poor's highlights US rental growth

11 September 2012

Ratings agency Standard & Poor's said it believes that a structural shift towards rental could explain the increasing demand for construction equipment rentals in the US since 2010.

The agency, in a statement released on 10 September, said equipment rental companies have increased their share of the sales market consistently since 1990 and could bring the market penetration of rental companies in the US closer to that seen in some other markets worldwide.

"Generally, we measure rental market penetration by the amount of new equipment that rental companies buy compared with the total sales of new equipment," said S&P credit analyst John Sico. "That figure has moved from about 35% in 2005, when the industry was in a similar phase in the cycle as it is now, to 50% currently".

The agency added that equipment rental also appeared to be taking up a larger share of overall non-residential construction spending. It said the rental companies it rated generated higher rental revenue growth compared to the growth in total non residential construction spending.

"Although we consider these factors when assigning or assessing our ratings on rental companies, they're unlikely to spur significant rating changes on their own," said Mr Sico.

"For instance, we continue to closely monitor companies' capital spending and its impact on free cash flow and resulting leverage. Nevertheless, an upward shift in demand for rental equipment is having a positive influence on the industry's credit quality.

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